OK, that's a rough argument that needs fleshing out. Has the rigorous argument actually been made and is widely accepted by economists or is this just a meme that's accepted and repeated without much basis?
Importantly, it's growth in total value, not growth in number of things. Hence, it's okay that growth is infinite without gobbling up the universe - we can always be better. Stuff can always be sexier.
Edit: And you do expect a return. You maintain your house, because it has a value and rent costs money, so you have more house in the future if you maintain it now. Imagine a world were rent and the value of your house is approaching zero, would you maintain it? You would have more house if you just kept your money and rented a house.
Edit: Obviously I am speaking in very extreme terms and ignoring the fact that there is a government acting and that not everything will happen instantly. These are just long-term forces.
My guess is that as long as there is even tiny growth, central banks can react with negative interest rates/taxing cash. It will take quite a while until there is no growth at all on the whole world. I think even Western countries have room for growth by mandating green standards.
When less and less growth is possible any more, I imagine we would have to start socializing industries, which reached that point, so they are taken out of the equation. People would then get a basic income and use it to pay for state provided services, which would not deflate, because the state does not have to care about market prices, it can just regulate competition. I think the problem here is more to find the right time for it, not the solution itself.
That growth by population growth is not sustainable should be obvious, somebody in here made a good argument why this is true even if we populate the universe.
About homes specifically - they have a life span too so they eventually have to be rebuilt or, as others have pointed out, maintained.
Or for a business perspective, I buy a dairy cow as an investment, when I sell the cow it will be worth much less than what I bought it for, but I don't mind because the cow has provided a steady stream of milk based income over the years.
So in these ways at least, it doesn't seem like economic prosperity is always dependent on growth.
Maybe in some economic circumstances cash might be a better investment or worth more than my dairy cow, but such a circumstance can't last for long because supply and demand affect money too right - so if enough people get rid of their dairy cow for the cash, eventually that would decrease the supply of milk, increasing price which would put me and my milk business back on top again would it not?
With the cow I think the problem is that many people would buy a cow to fulfil the basic need so margins would be extremely thin. People would soon stop buying cows again.
I think this would be generally the case in such a situation: Everything would be a commodity and margins would approach zero. You need only very few people to produce commodities. The majority of the population would be unemployed.
This is not a bad outlook per se, my argument is just that our current system needs growth. We would have to gradually adjust the system once we realize that there is now way to create growth any more.
A person could have an appealing investment - for example building a more attractive fruit shop, with better customer service - taking all the sales from the current fruit shop .
But the GDP will remain the same.
"[I]f energy became arbitrarily cheap, someone could buy all of it, and suddenly the activities that comprise the economy would grind to a halt. Food would stop arriving at the plate without energy for purchase, so people would pay attention to this. Someone would be willing to pay more for it. Everyone would. There will be a floor to how low energy prices can go as a fraction of GDP."
http://physics.ucsd.edu/do-the-math/2012
It seems like a similar argument could be made for land.